Being a Trustee can have its advantages and disadvantages. Getting along with Beneficiaries is Key!
Considering Removing a Beneficiary from a Trust?
If you are the successor trustee, then you are responsible for carrying out the fiduciary duties of the irrevocable Trust. If you are looking to “remove” a beneficiary because of tension between you, i.e., the successor Trustee and a Beneficiary, then in short, No, you cannot remove a Beneficiary.
What is a Power of Appointment?
Within the Trust, would be an amendment called the “power of appointment” that allows a person the ability not to remove a beneficiary but to adjust the distribution of assets. The Trust distribution provisions can be changed with the Power of Appointment and not to “remove” a beneficiary.
Who is Given the Power of Appointment
Now, this power of appointment is customarily given to a surviving spouse. The surviving spouse may have children that are in a different financial status point in their life. The settlors’ view is the following: The surviving spouse has the right to change on the fly the distribution of the assets. If the settlor opened this up for the successor trustee to change the distribution of assets, you would look for the power of the appointment amendment. The power of appointment, however, must be exercised in order to come into effect. Primarily it works similar to an amendment which allows the surviving spouse to move the assets around, i.e., gives property to whomever he/she so chooses.
With a Power of Appointment, it typically will have limits to how much gifting and the amount of the change is allowed.
Where do I find the provision to remove a beneficiary?
So to determine if you can “remove” a beneficiary, you will need to look into the Trust document, as there is no legal right given to a Trustee to remove any heir or Beneficiary from a Trust.
What are the Rights of a Trust Beneficiary?
As a trust beneficiary, they have the right to ensure a properly managed Trust. They also have the right to the following:
- Payment: As set forth in the Trust document, they are rights to the distribution.
- Right to Information: Beneficiaries have the right to the administration of the Trust.
- Right to an accounting: All current beneficiaries are entitled to an accounting of the Trust. The accounting will include a.) all income b.) expenses c.) distributions. Also, they are privy to an annual accounting.
- The Beneficiary has a right to petition the removal of a Trustee: Should the beneficiary feel, and have been reasonable in their timeframes and approach, and have not received the needed information from the Trustee, the Beneficiary can petition to the courts the Trustee removal process.
What are the responsibilities of a Trustee?
As a Trustee, it’s essential to be transparent and recognize that most beneficiaries are unfamiliar with the trust administration process. Their first thought maybe fear of not being paid and paranoia that a shady backhanded agenda is at work.
To combat the reason to want to remove a beneficiary from a trust, you will want to consider the following:
- Contact the beneficiaries’ early in the process. (note: there are timeframes that specific steps must take place). An estate planning attorney can help guide you and protect you, and the estate.
- Education: Educate them as to your role, your objective, letting them know your fiduciary responsibility is the settlor’s wishes, and that your fiduciary duty is to put the beneficiaries in front of your, the Trustee’s preferences.
- Discuss time frames, etc.: Many times, beneficiaries believe within weeks of the settlor’s passing, that they should be able to get some of the estate benefits. Let them know that many steps are needed before any distribution can take place, such as paying taxes, debts, etc.
- Trust document: Keep a handy copy of the trust document for review. If a beneficiary asks for it, you have easy access to it, eliminating the possibility that you are unreasonable for not sharing the information.
To close, having experienced counsel by your side is of the utmost importance. You know, if found to be negligent in the pursuit of the estates’ wishes, you can be held personally responsible at can be a civil matter. Never let this happen.